Bitcoin Breaks Support

Bitcoin prices have fallen back to their lowest level since February today, with BTC futures breaking down below the 60695 price level which has underpinned the market over recent months. Fears of a hawkish shift from the Fed are amplifying the selling with traders bracing for a firmer Dollar on the back of the FOMC tonight. Expectations of forthcoming Fed easing had been a key driver behind the rally earlier in the year.

Shifting Fed View

However, with the market’s Fed outlook shifting over the last two months, BTC bulls have lost momentum. Traders had originally been anticipating a Fed rate cut in June, with that forecast now pushed out to September. The risk ahead of tonight’s meeting is that the Fed takes a more hawkish stance in its outlook, leading September easing chances lower.

Hong Kong ETF Debut

Along with hawkish Fed expectations, BTC is also suffering on the back of a weaker spot-BTC ETF debut in Hong Kong. The first day of funds being listed saw just $10 million in inflows. With demand for spot-BTC ETFs in the US having dried up over the last month, traders are sensing risks of a deeper pull-back here.

Outlook 

Looking further out, the backdrop still looks favourable for higher BTC prices by year end. A big factor in this will be US inflation and the Fed outlook. Bulls need to see a fresh drop in US inflation and a lift in near-term easing expectations to help revive demand.

Technical Views

Bitcoin

The sell off in BTC has seen the market breaking down below the 60695-support level. This is key shift in the technical picture and with momentum studies bearish, the focus is on a continuation down to the 49425 level next with potential for support ahead of that at the $50k psychological level. 

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